Senior Honors Projects, 2010-current

Creative Commons License

Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Date of Award

Spring 2014

Document Type


Degree Name

Bachelor of Science (BS)


Department of Finance and Business Law


Jason Fink

Kristin Fink

Elias Semaan


Following the financial crisis of 2007-2009, many analysts argued that market insiders should have anticipated the crisis. We update and apply the Bates (1991) method to see if investors anticipated a stock market crash during this period. S&P 500 options prices are used to estimate daily implicit parameters from the constant volatility jump diffusion (CVJD) model used by Bates, a stochastic volatility no-jump (SV) model, and a stochastic volatility jump diffusion (SVJD) model, and we analyze the implicit investor expectations of large negative price jumps in the stock market. Rather than finding any predictions of the crisis, we find evidence of efficient markets as the parameters implied by S&P 500 options move in step with the market as a whole.



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